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The Supreme Court recently clarified the rights of parties in arbitration proceedings. In the case of Dani Wooltex Corporation & Ors v. Sheil Properties Pvt. Ltd. & Another, the Court ruled that an arbitrator cannot simply halt proceedings because a party fails to appear for a hearing after filing a claim.

The case stemmed from a real estate development agreement between Dani Wooltex and Sheil Properties. Dani Wooltex also entered a separate agreement with Marico Industries for another portion of the land. This led to a dispute, with both Sheil and Marico filing lawsuits against Dani Wooltex.

An arbitrator was appointed to handle the claims. Marico’s claim was heard and resolved with an award. However, Sheil’s claim remained inactive for eight years. Dani Wooltex argued that Sheil’s inaction constituted an abandonment of the claim and requested the arbitrator to dismiss it.

The Supreme Court emphasized that the power granted under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996 can only be used if continuing the proceedings becomes truly unnecessary or impossible.

The Court stressed that arbitrators must have clear justification based on evidence to terminate proceedings under this section. Simply exercising this power casually would undermine the purpose of the Act, which aims to resolve disputes efficiently.

The Court acknowledged that a claimant abandoning their claim could be a reason to deem proceedings unnecessary. However, abandonment needs to be proven. It can be expressed (clearly stated) or implied, but cannot be easily inferred.

The Court’s key finding was that a claimant’s failure to request a hearing date after filing their claim does not automatically equate to abandonment. This clarifies that claimants have some leeway in managing their participation in arbitration proceedings.

This ruling protects claimants’ rights and ensures that arbitration remains a viable option for resolving disputes, even if there are delays in pursuing claims.

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